Fidelity Investments Canada ULC and Sterling Mutuals Inc.

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the requirement in s.3.2.01 of NI 81-101 to deliver a fund facts document to investors who purchase mutual fund securities of series only sold under an initial sales charge pursuant to changes in systematic instructions related to pre-authorized purchase plans that contemplated investment in certain series only sold under deferred sales charge options -- subject to conditions.

Applicable Legislative Provisions

National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 3.2.01 and 6.1.

May 19, 2022

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF FIDELITY INVESTMENTS CANADA ULC (Fidelity) AND IN THE MATTER OF STERLING MUTUALS INC. (the Representative Dealer, and, together with Fidelity, the Filers)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from Fidelity on behalf of each mutual fund managed by Fidelity (theFunds) and the Representative Dealer for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Funds from the requirement in subsection 3.2.01 of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) which requires a dealer, unless the dealer has previously done so, to deliver the most recently filed fund facts document to the purchaser before the dealer accepts an instruction from the purchaser for the purchase of a security of a mutual fund (the Fund Facts Delivery Requirement) in respect of purchases of initial sales charge (ISC) series of securities of a mutual fund made in connection with a Change of Systematic Instructions (as defined below), pursuant to implementation of the prohibition on deferred sales charges (DSC Ban) for mutual fund sales (the Requested Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for the Application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

Fidelity

1. Fidelity is a corporation amalgamated under the laws of Alberta and has its head office in Toronto, Ontario.

2. Fidelity is registered as an investment fund manager in Ontario, Québec and Newfoundland and Labrador, as a portfolio manager in each of the Jurisdictions, as a commodity trading manager in Ontario and as a mutual fund dealer in each of the Jurisdictions.

3. Fidelity is not in default of securities legislation in any of the Jurisdictions.

The Funds

4. Fidelity is the investment fund manager and trustee of the existing mutual funds established as mutual fund trusts and the investment fund manager of the existing mutual funds which are classes of shares of a mutual fund corporation.

5. Each Fund is an open-end mutual fund trust created under the laws of the Province of Ontario or an open-end mutual fund that is a class of shares of a mutual fund corporation.

6. Each Fund is a reporting issuer in some or all of the provinces and territories of Canada and subject to National Instrument 81-102 Investment Funds (NI 81-102). The securities of the Funds are qualified for distribution pursuant to a simplified prospectus, Fund Facts and annual information form that have been prepared and filed in accordance with NI 81-101.

7. The Funds are not in default of any of the requirements of securities legislation in the Jurisdictions.

The Representative Dealer

8. Securities of the Funds are distributed through dealers that are unaffiliated with Fidelity, including the Representative Dealer (the Dealers, and each, a Dealer).

9. The Representative Dealer is a corporation existing under the laws of Canada with its head office located in Windsor, Ontario.

10. The Representative Dealer is a member of the Mutual Fund Dealers Association of Canada (MFDA) and is registered as a dealer in the category of mutual fund dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec and Saskatchewan, and is registered as a dealer in the category of exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Nunavut, Ontario and Saskatchewan.

11. Each Dealer is registered as a dealer in the applicable Jurisdictions. The Dealers are members of either the Investment Industry Regulatory Organization of Canada or the MFDA, or registered as a mutual fund dealer with the Autorité des marchés financiers in Québec, if such Dealer is only registered in Québec.

12. The Representative Dealer is not in default of any of the requirements of securities legislation in the Jurisdictions.

Deferred Sales Charge Ban

13. The Funds have a separate series structure for DSC and ISC purchase options within the same mutual fund.

14. Series A, Series T5 and Series T8 securities of the Funds are sold on a DSC basis, including the low load deferred sales option and low load 2 deferred sales option (DSC Series). Series B, Series S5 and Series S8 securities of the Funds are sold on an ISC basis (ISC Series).

15. Under the DSC Ban, no new sales of mutual funds will be permitted using the DSC purchase option as of June 1, 2022.

16. As a result of the DSC Ban, combined with Fidelity's separate series structure, the change of instructions from DSC to ISC Series on pre-authorized purchase plans and other systematic transactions (Change of Systematic Instructions), will trigger a fund facts delivery obligation for the Dealers in respect of the first purchase of the ISC Series, which we believe is unnecessary.

17. In a previous decision dated December 21, 2017, Fidelity obtained exemptive relief from the OSC from the Fund Facts Delivery Requirement in connection with the automatic conversions (the Automatic Conversions) of securities of the Funds sold on a DSC basis to securities sold on an ISC basis to permit investors to benefit from lower management fees and operating expenses once their DSC securities had matured.

18. The only differences (the Series Differences) between DSC Series securities and ISC Series securities of the same Fund, in addition to the feature that allows Automatic Conversions, are that:

(i) DSC Series are sold on a DSC basis and ISC Series are sold on an ISC basis;

(ii) the management fees for ISC Series securities are lower than the respective management fees for DSC Series securities;

(iii) investors in ISC Series securities are able to potentially benefit from tiered management and administration fee reductions; and

(iv) the trailing commissions paid to dealers on ISC Series securities are higher than those paid on DSC Series securities.

19. While the trailing commissions paid to dealers on ISC Series securities are higher than those paid on DSC Series securities, the overall management expense ratio is lower for investors.

20. Each Fund's simplified prospectus and DSC Series Fund Facts disclose:

(i) that the DSC Series securities, as applicable, will be automatically switched following the expiry of the applicable minimum period specified in the simplified prospectus on the applicable switch date, to ISC Series securities, as the case may be, of the same Fund;

(ii) that such ISC Series securities will have a lower management fee than the corresponding DSC Series securities, will not be subject to a deferred/low load sales charge with a redemption fee, and may qualify for tiered management fee reductions based on the level of assets invested;

(iii) the rate of the management fee for ISC securities, as applicable; and

(iv) the trailing commission rates payable by Fidelity in respect of the ISC securities.

21. As each investor subject to a Change of Systematic Instructions has received a DSC Series Fund Facts and is informed of the Series Differences, there would be no benefit for such investor to receive a Fund Facts in connection with a Change of Systematic Instructions.

22. The exemption from the Fund Facts Delivery Requirement in connection with the Change of Systematic Instructions is comparable to the Automatic Conversions, as a result of the regulatory changes prohibiting DSC sales.

23. The investment in ISC Series securities pursuant to the Change of Systematic Instructions will be in securities of the same Fund with the same underlying pool of assets, the same investment objectives and investment strategies and the same valuation procedures and will be otherwise identical, except for the Series Differences.

24. In the absence of the Requested Relief, the Change of Systematic Instructions are not capable of being implemented without compliance with the Fund Facts Delivery Requirement.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that:

1. no ISC is charged in connection with a purchase of securities of ISC Series of a mutual fund made in connection with a Change of Systematic Instructions;

2. for investors purchasing securities of ISC Series of a mutual fund made in connection with a Change of Systematic Instructions, the Filer sends to such investors a notice advising that they will not receive the Fund Facts upon the Change of Systematic Instructions, but that:

a. they may request the most recently filed Fund Facts for the relevant series by calling a specified toll-free number or by sending a request via email to a specified address or email address;

b. the most recently filed Fund Facts will be sent or delivered to them at no cost;

c. the most recently filed Fund Facts may be found either on the SEDAR website or on the Filer's website; and

d. they will not have the right to withdraw from an agreement of purchase and sale in respect of a purchase of Series B, Series S5 and Series S8 securities made pursuant to a Change of Systematic Instructions, but they will have the right of action for damages or rescission in the event any Fund Facts or document incorporated by reference into a simplified prospectus for the Series B, Series S5 and Series S8 securities, as applicable, contains a misrepresentation, whether or not they request the Fund Facts;

3. the Filer provides to the principal regulator 60 days after the date upon which the Requested Relief is first relied upon by a Dealer, a list of all such Dealers that have relied on, or intend to rely on, the Requested Relief;

4. prior to a Dealer relying on the Requested Relief, the Filer provides to the Dealer a disclosure statement informing the Dealer of the implications of this decision.

"Darren McKall"

Manager, Investment Funds and Structured Products Branch

Ontario Securities Commission

Application File #: 2022/0107